11 Simple Rules of Trading Experts
Over my last 14 years investing in the markets, from penny stock picker to licensed trader and advisor. I have learned trading lessons the easy and hard way continuously trying to improve (simplify) the process of making sound investing decisions. Let’s review these simple rules that continue to hold true in the market.
- What’s expensive tends to get more expensive, focus on buying on the way up
- As much as you love this particular trade, it’s just another one and there will be thousands more, focus on moving your stop to breakeven as the trade starts to work in your favor, if it never works in your favor that is a sign to take the loss and forget the story as to why you should be right
- Dollar cost averaging at a lower price is ok once, and sometimes needed twice, anymore your adding to a sinking ship, cut the loss or stop adding
- Money is made slow, give it time, most short term moves have at least a 3 day move in them, try to avoid selling too soon such as selling the same day your buying, instead keep moving your stop up and see how much more of the move you're actually a part of
- There are always new gimmicks in the market, avoid them, the cheap and worthless name are gas station sushi, sure they may have a fast move but we all know they never last and by the time you are aware you already missed the meat of the move
- Earnings are unpredictable, avoid holding through them as often as possible, if you have a solid cushion (10%+) in the name, and you hold through it, right or wrong your mindset should be holding until the next earnings report, if that is not realistic (you know yourself better than I do) don’t waste your time with earnings
- The larger your allocation of capital is in fewer names the greater the fluctuations of your overall return with be (good and bad), the more you diversify your capital the closer you will get towards average market returns, which comes down to your own risk tolerance
- Focus on the percentages and the dollars follow, focus on the dollars and you will cap your upside
- One of the secrets to trading isn’t being the best traders or having the best price, it’s having extremely specific goals so you know what your aiming for, most traders never set monthly, yearly PnL goals and end up running in circles or never knowing when to take a break
- If it takes more than 2 sentences or 30 seconds to explain an idea, it’s probably a bad idea
- If you are going to celebrate your wins, don’t whine about your losses, no one likes a cry baby
One last bonus rule, the simplest long term investment strategy is to just continue to buy the SPY, this is so boring, virtually everyone cannot do it, yet it works, a good rule of thumb is to keep 1 of your accounts that strictly follows this method and see if you can beat the market. If you can it's a win, if you can’t at least your account beat you which is still a win. There are few win wins in investing, this is one of them. The best account to follow this approach is in your 401k, the second best is in a taxable account.
The Secret Task
In the group share your list of simple rules.